Wells Fargo Fires 5,000 Employees Over Fake Accounts
RENEE MONTAGNE, HOST:
Wells Fargo Bank is being hit with the largest penalty yet imposed by the Consumer Financial Protection Bureau. In total, Wells Fargo will pay $185 million to the CFPB and other regulators who say bank employees earned bonuses by illegally creating accounts for customers without their knowledge. NPR's Chris Arnold reports.
CHRIS ARNOLD, BYLINE: Banks have gotten into trouble quite a bit lately. But this scheme is still pretty astounding in that so many people at the bank were involved.
JEFF EHRLICH: We found that thousands of Wells Fargo employees engaged in these unlawful sales practices.
ARNOLD: That's Jeff Ehrlich with the CFPB. He says, already, Wells Fargo has fired a lot of people as it's reviewed the extent of the wrongdoing.
EHRLICH: The bank terminated roughly 5,300 employees for engaging in this conduct. So this was a widespread, nationwide practice.
ARNOLD: OK. Here's how regulators say this worked. Bank employees took money out of customers' accounts without telling them to secretly open other accounts in the customer's names - checking and savings accounts, credit cards.
The employees did that to get bonuses through an incentive program at the bank. And customers often got stuck paying fees that they shouldn't have paid. Los Angeles City Attorney Mike Feuer investigated Wells Fargo, along with the CFPB.
MIKE FEUER: It is outrageous for a bank to use a customer's private information without permission to open an unwanted account. It's outrageous for a bank to transfer funds without consent to fund the unauthorized account. And it's outrageous for a customer to incur unexpected fees from such conduct.
ARNOLD: The incentive program at the bank was designed to encourage employees to drum up more business - open more accounts - presumably, not to commit a massive fakery. But CFPB director Richard Cordray says it wasn't hard for thousands of Wells Fargo employees to figure out how to game the system.
RICHARD CORDRAY: To inflate their sales figures and to meet their sales targets and claim higher bonuses.
ARNOLD: Nancy Kim is a professor at California Western School of Law in San Diego. She says a company needs to be careful with incentive programs. With so many employees breaking the rules, she says, Wells Fargo...
NANCY KIM: They created incentives, which led their employees to take these extreme measures. So they set up sales quotas. And they provided bonuses. And employees had these incentives to act in these ways that were unlawful.
ARNOLD: CFPB director Richard Cordray says he wants to put banks on notice that they need to monitor their compensation programs.
CORDRAY: Unchecked incentives can lead to serious consumer harm. And that's what happened here.
ARNOLD: For its part, Wells Fargo said in a statement, quote, "we regret and take responsibility for any instances where customers may have received a product that they did not request." The bank did not legally admit or deny wrongdoing, though, as part of the settlement. On top of the penalties, Wells Fargo has agreed to set aside $5 million to reimburse consumers. Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.